The European Supervisory Authorities (EBA, EIOPA and ESMA) published new guidelines today. They explain how national banking and insurance supervisors should include ESG risks in their stress tests, using both existing methods and additional ESG assessments.
The Guidelines set common standards for incorporating ESG risks into stress testing across the EU financial system. They explain how to design ESG-inclusive stress tests and describe the organisational and governance arrangements required.
They support a consistent long-term approach while allowing flexibility as methodologies evolve and data availability improves. The Guidelines do not require competent authorities to conduct additional ESG-focused supervisory stress tests.